Here’s why DeepSeek crashed your Bitcoin and crypto

DeepSeek may have “nothing to do” with crypto, but its sudden entrance on the scene affected crypto prices.

The Bitcoin price dropped 6% on Jan. 27 when stock markets responded to the debut of China’s open-source, highly efficient AI model that investor Marc Andreessen dubbed “AI’s Sputnik moment.”

DeepSeek spooked US markets on news that the model’s developers were able to produce a worthy competitor to American AI firms like OpenAI at a fraction of the cost. The firm claims it was able to develop its AI model on a shoestring budget of just under $6 million using less advanced hardware from semiconductor manufacturer Nvidia. 

Tech stocks took a beating. All of the “Magnificent Seven” — Apple, Nvidia, Tesla, Microsoft, Amazon, Meta and Alphabet (Google) — saw losses, with Nvidia breaking a Wall Street record and dropping nearly 17% on the day.